UK politics & other distractions

Post UK Politics and Other Distractions - Oakham

Over the last 12 months, political events around the globe have certainly given us all plenty to think about.

The UK election was triggered, supposedly, to encourage stability and promote certainty, but evidently the very opposite outcome has occurred.  Thankfully, from an economic perspective at least, a weak government doesn’t necessarily mean weak growth.  In fact, history shows that the UK economy has grown healthily in periods when governments have been teetering on the edge.  Furthermore, in the current situation, the government may well ditch plans for further austerity and take a more considered approach to Brexit.  In the medium term, these two U-turns can only be positive for companies based in the UK and for the British economy in general.

Whatever the prognosis, we know how important it is not to allow politics to influence our investment strategy.  Obviously political developments are entirely beyond our control, and, as has been proven in the last year, highly unpredictable.  The consensus views were that a vote for Brexit in the UK, and a Trump win in the US, would both be bad for equity markets.  However, in both cases, the markets rose strongly, after some initial volatility.

It is essential that we look through the noise, and remain steadfast to the investment process which we know works for the long term.  Extensive work in the field of behavioural finance tells us, loud and clear, not to gamble on specific outcomes or expectations, and only to make decisions on what is known.

We find ourselves again facing a period of significant political uncertainty, and so perhaps it is worth reiterating some key elements of the strategy which we will continue to adhere to.

In the current environment, we will:

  • Remain invested for the long term, and not make decisions based on the outcome of future events.
  • Continue to invest with an international bias (via global strategies and via multinational companies), neutralising the specific concerns currently levelled at the UK economy and, more acutely, sterling.
  • Acknowledge that cash returns are still negative after inflation.
  • Prepare for inflation and interest rates to revert (ie rise) in the long term.
  • Understand the long-term irrefutable trends of our time, such as the ageing global population and the accelerating impact of new technologies and artificial intelligence.

At a time of uncertainty, perhaps it is reassuring to highlight the returns that the strategy has achieved over the last 3 years. Click <> here to see the performance of our model portfolios against their respective ARC benchmarks (which are provided for the wealth management industry by Asset Risk Consultants).  The figures are presented to the end of May in line with the monthly figures released by ARC.

I trust these thoughts provide some comfort in these uncertain times.  As ever we welcome your thoughts on any topic.

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